The US Department of State 2013 reports that corruption is not a systematic problem in the UAE. The Bertelsmann Foundation 2012 states that the government has effective measures to carry out investigations and to stamp out corruption, and in practice, several cases exposed in recent years indicate the government's willingness to combat corruption.
A majority of corruption cases in the UAE include attempts of bribery by citizens caught in illegal practices. Cases of officials actually accepting bribes reportedly 'represent only 1% of total cases'. The police also maintains that only 1% of the complaints are made anonymously, showing that the population has a high degree of trust in the police. The overall picture is that of a quasi-corruption-free country. However, corruption is reportedly a problem within the higher echelons of emirate society. These cases usually involve fraud or embezzlement, and bribery. Several senior Emirati and foreign nationals were dismissed and detained, while numerous bribery cases involving lower-ranking officials were reported in 2010. In 2012, the country's anti-corruption body uncovered 10 cases in which more than USD 272 million public funds were misappropriated, according to the US Department of State 2013. These scandals have highlighted what the business community had complained about for a long time, namely, the UAE's lack of transparency. Furthermore, the enforcement of the rule of law is further impaired by a weak judicial system vulnerable to political interference, as the 2013 Index of Economic Freedom by Heritage Foundation reports.
However, the government had indeed already made some efforts to improve the UAE's reputation in this regard and, according to a June 2012 article by Emirates 24/7, the State Audit Institution - the country's sole anti-corruption authority - has played a major role in safeguarding public funds and curbing financial malpractices. The State Audit Institution has drawn up an anti-corruption law, which will be discussed in the cabinet as well as in the Federal National Council and then submitted to the Federal Supreme Council for ratification.
Business and Corruption
UAE leaders are committed to attracting FDI to the country and becoming an economic hub in line with Hong Kong, London or New York. Business executives interviewed in the World Economic Forum's Global Competitiveness Report 2013-2014 cite corruption among the least problematic factors to doing business in the UAE. Instead, access to financing, the lack of skilled labour force and restrictive labour regulations constitute some of the largest obstacles. In addition, the UAE's low degree of good governance, which is especially prevalent in the private sector, also represents a major obstacle. Allegedly, the fast-paced economic development undergone in the UAE in recent years has not resulted in the modernisation of company management styles. Corruption in the private sector takes the form of fraud or embezzlement rather than bribery. After the 2008 global economic crisis, corruption cases surfaced in the UAE; nevertheless, in general, companies in the UAE rank well in the Global Competitiveness Report 2013-2014 in terms of their ethical behaviour in interacting with public officials, politicians and other companies. In the same report, the UAE also ranks well in terms of the irregular payment of bribes, suggesting that these situations rarely occur. This is backed-up by the US Department of State 2013, which states there is no evidence showing corruption of public officials to be a systemic problem.
Personal relationships still play a huge role in obtaining and retaining business and in company hiring processes when overcoming legal issues, speeding up administrative processes or avoiding lines in government agencies. According to a February 2012 article by Gulf News, the use of 'wasta' (connections and favouritism) in the UAE represents a challenge as it can affect hiring and promotion policies. The Bertelsmann Foundation 2012 reports that market competition in the UAE has to improve as foreign companies still have to rely on local sponsorship if they want to succeed in their business.
The US Department of State 2013 reports that government tendering is not conducted according to generally accepted international standards, and retendering is the norm. Moreover, ruling families' involvement in the economy provides for an uneven playing field and conflict of interests is a major area of concern since the same person can hold governmental as well as business positions at the same time. Companies are, therefore, recommended to develop, implement and strengthen integrity systems, as well as conduct extensive due diligence, when planning to do or when already doing business in the UAE.
Labour regulations represent a major obstacle for companies doing business in the UAE, according to the business executives interviewed in the World Economic Forum's Global Competitiveness Report 2013-2014. Companies have to be registered to operate in the country, and the authorities strictly uphold this requirement. The government has cut red tape to facilitate the establishment of new investors and is expected to continue fostering a more conducive environment for foreign investment, according to the US Department of State 2013. The procedures to get an operating licence are now reportedly straightforward and publicly available in all emirates. Building permits can also be obtained faster now (compared to in previous years) due to improvements in an online system for processing applications. Furthermore,the World Bank & IFC's Doing Business 2014 report notes that the UAE has made paying taxes easier for companies by establishing an online filing and payment system for social security contributions. According to the United Nation's E-Government Survey 2012, the UAE is among a few countries that have come close to a pure one-stop-shop portal with information, services and participation services integrated on one site.
Investment laws have improved, and the environment is now more conducive for business, according to the US Department of State 2013. Investment by foreign nationals is still restricted by law, and home companies are favoured over foreign ones; however, the regulatory environment is being reviewed to mitigate this discrimination. The government has established the Department for Foreign Investment at the Ministry of Economy. The Department provides investors with information about regulation and investment opportunities and provides direct customer service. Companies wishing to invest in the UAE can therefore gather information on investment policies and regulations, as well as information about the country in general, on the Ministry of Economy's website. According to an October 2011 article by Corporate Law and Governance, the Department of Economic Development together with the Institute for Corporate GoverKnance, Hawkamah, published a Corporate Governance Code for small- and medium-sized companies. The new code is part of a wider program of awareness-raising and compliance-training, which will be developed by Dubai SME in partnership with other organisations, as reported by another September 2012 article by Out-Law. The government also offers support services to foreign firms working in the free zones. According to the Heritage Foundation 2014, the UAE has demonstrated important improvements in its level of economic freedom; this is thanks to the government's efforts to strengthen the business climate, boost investment and foster the emergence of a more vibrant private sector. Nevertheless, the report notes that economic freedom is curbed by a burdensome investment framework.
The UAE government continues to lead the region in protecting intellectual property rights (IPR), even though some argue that it could do more to stop the transhipment of counterfeit goods. Dispute resolution can be difficult and uncertain, as reported by the US Department of State 2013. Arbitration is a commonly used measure to resolve commercial disputes, but it is reportedly difficult to enforce the awarding as it must be endorsed by the courts. Court proceedings may reportedly continue for several years. The UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards has been effective in the UAE since 2006. Any award issued in other member states will consequently be directly enforceable in the UAE. Moreover, the UAE is member to the International Centre for Settlement of Investment Disputes (ICSID). Commercial disputes are normally heard by civil courts, but in the emirate of Abu Dhabi, they are first brought before the Abu Dhabi Conciliation Department. In Dubai and Abu Dhabi, the Chambers of Commerce have established arbitration centres to expedite commercial disputes. The award of such arbitration centres have still to be certified by courts, and their enforcement can therefore face considerable delays. Access the Lexadin World Law Guide for a collection of legislation in UAE.